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Historical Trend of Retail Sales

Today’s Advance Monthly Sales for Retail and Food Services (12/2015) supports the anecdotal activity that many are observing: modest but forward movement. And good news is good news, perhaps especially this far into expansion. A look at retail sales growth excluding autos shows about 26% growth over the long haul of this economic expansion:

Chronologically, this expansion is old. It has now lasted into its 77th month, making it the fifth longest of the 34 expansions since 1900. Looking at light-vehicle sales, at over 18 million units annualized in each of the last two months, we should be close to a peak. Housing starts, however, remain well below their long-term averages, suggesting years of expansion to come, while interest rates and inflation are at levels normally associated with early expansion. Moreover, all of these measures are severely distorted by extremely aggressive monetary easing.

However, there is one “North Star” variable that has behaved in almost the same way in all modern expansions, namely, the unemployment rate….The November employment report confirmed that the unemployment rate has now been falling for six years at a steady pace of 0.8% per year and has now declined to 5.0%. Slow labor force growth and steady economic growth suggests a continuation of this pace, which would put the unemployment rate at 4.2% in November of 2016 and 3.8% in the spring of 2017.

With these measurements of employment, it is interesting that consumer behavior has not snapped back at the same pace as in previous recoveries. For example, compare the same data during the expansion cycle after the brief recession following the dot-com correction:

Now look at the blistering pace for the previous decade:

Notice the decline (or less steepness) with each recovery cycle? Put another way, the percentage increases for the above three cited time spans of expansion is (beginning): 1992: 61%, 2001: 41%, 2006: 26%.